The life cycle of buildings is capital intensive. The planning and construction phase through to ongoing operation and maintenance all require significant expenditure. This includes purchasing land and paying for materials and labor. Then, during the building’s operation, there will be a variety of capital projects and equipment upgrades. Some of these capital costs are unavoidable. But there is a new trend in buildings: using an “as-a-service” model to fund some of these capital-intensive expenditures with ongoing service fees.

The “as-a-service” model has been common in software for years. Enabled by cloud computing and high-speed Internet connectivity, large companies no longer have to buy hardware (such as servers) to run their own business and management software. Instead, these firms can simply pay an ongoing license fee and access the same functionality via the Internet. One of the software-as-a-service pioneers is Salesforce, which provides customer relationship management software to enterprises. Prior to Salesforce, firms that sought such software would buy on-premise software and load it on their own computing infrastructure. This required significant capital every few years because buyers had to upgrade their software and hardware. Paying an ongoing license fee and getting all the functionality is a better option for many businesses. Now it’s hard to find firms that still use on-premise customer relationship management software.

Within the facility market, a variety of firms have offered software-as-a-service (SaaS), much like customer relationship management solutions, to provide energy or facility management capabilities. The SaaS applications typically offer more functions, are easier to use, and are easier to upgrade than the on-premise alternatives. That said, there still are many portfolios that use on-premise building automation systems (BAS) or computer-aided facility management (CAFM) to manage energy and operational work. Unlike other industries, the SaaS offerings have not completely disrupted traditional software/firmware solutions. For example, an on-premise BAS may be a compelling solution to manage worker comfort and control HVAC. In fact, some SaaS offerings sit on top of the existing BAS to make the BAS capabilities easier to use.

Moreover, building portfolios that are satisfied with their current on-premise systems may be deterred by the switching costs associated with the new solution (such as deployment and training). Many SaaS applications in buildings are focused on providing data, but it is up to the building staff to use that data and derive value out of it. In some cases, building owners are looking for a clearer, more direct value proposition.